-- Posted Monday, 27 September 2010 | | Source: GoldSeek.com
During the past few years of the gold bull market, my main investment strategy was focused on near-term gold producers. My aim was to find leverage to the rising gold price but reducing as much risk from the very volatile market conditions. After considering many investment choices, Timmins Gold Corp. offered a very attractive risk-reward opportunity as an emerging gold producer.
In April of 2009 I profiled Timmins Gold’s past producing gold mine in Sonora, Mexico. At the time, Timmins Gold was seeking its final capital investment to fund final operational startup of its highly attractive gold asset. The economics calling for a production of 80,000 ounces at around $400 a gold ounce providing about $40 million a year in cash flow – using the gold price at the time.
As forecasted, the gold price has moved well past $1,000 and has the demand support to move significantly higher in the coming years. Using the latest gold price and now increased production target to 80,000 - 100,000 gold ounces per year, the updated cash flow model adds upwards of $40 million. Meaning a new estimate of upwards of $80 million per year in cash flow!
Timmins Gold has delivered to its investors the promise of going into production in a timely manner. Now with full production estimated to be reached by year’s end, Timmins Gold will see a rapid strengthening of its balance sheet and entering into a strong cash flow situation. From an investor’s perspective, this is another major milestone to revaluing the risk component in Timmins Gold share price.
San Francisco Gold Mine
Since last year, Timmins Gold has updated their NI 43-101 resource on the San Francisco Gold project, increasing their resource by about 25% to 895k measured and indicated and another 154k gold ounces in the inferred category. This should move the mine life to several (6-7) years with additional years soon likely to be added through active exploration programs.
The 25% increase in the resource was achieved using a limited step-out drill program. With additional drilling beyond the pit underway showing mineralization 150 meters beyond the current open pit, the resource should easily clear the million ounce mark. A 70,000 meters drill program for 2010 should continue add ounces and upgrade the resource – expanding the mine life even further.
Here is an overview of the San Francisco Gold Project.
San Francisco Gold Mine – Economics:
- $412/ounce cash costs
- 80,000 - 100,000 ounces/year production
- $64-80 million a year in cash flow assuming $1,200+ gold
- Fully diluted share structure estimated to be around 145 million shares = $0.44-$0.55+/share in cash flow
Additional Information:
- 12,000 tons per day throughput
- Modular design, expansion possible
- Production capacity 100,000+ ounces
- 895,725 gold ounces (Measured & Indicated)
- Additional 154,040 gold ounces (inferred)
- 42,000+ hectares property
- Sizeable upside deposit growth through exploration
- High potential for 1+ million economically recoverable gold ounces
- Permits: All in place
- Past production 300,000+ ounces (1996-2001)
- 13.5 million tonnes of ore grading 1.13 grams/tonne
Conclusion
Timmins Gold has a strong institutional shareholder base including Sprott Asset Management, Pacific Roads Capital, Baker Steel and Precious Capital. Together institutional holdings compromise 45% of the company with management and insiders holding another 14%. Owner management and strong institutional ownership is a very attractive attribute I find as an investor.
Although gold miners are seeing greater value for their production status, Timmins Gold still is trading below the industry average – currently around 8-10 times cash flow. Assuming 80,000 – 100,000 ounces per year and using a fully diluted share basis, this would give Timmins Gold a $3.50-$5.50+ a share, using current relative market valuations for similar gold producers. Based on the trend and drilling data we have seen, I can see that Timmins Gold’s San Francisco Gold project growing well past the million ounce mark next year; expanding the life of the mine.
Shareholders have been rewarded by Timmins Gold share price appreciation over the past year with gold production commencing and now ramping up. With full production just months away, Timmins Gold should continue to find its shares revalued with additional upside pressures coming from the record gold prices. The successful junior gold producer should quickly see its balance sheets strengthening, resource expansion grow and continue to reward its shareholders. Timmins Gold remains one of my top gold stock investments.
- Peter Spina, GoldSeek.com
Research Resources:
Symbol: TMM.v | US routing symbol: TMGOF
Website: www.timminsgold.com
43-101 Report: http://www.timminsgold.com/i/pdf/NI43-101.pdf
Google Maps: San Francisco Gold Open Pit Mine
Google Earth: San Francisco Gold Project
o This requires the free Google Earth: http://earth.google.com/
Company Contacts:
Bruce Bragagnolo, LLB.
Timmins Gold Corp.
Chief Executive Officer
Phone: 604-682-4002
Email: bruce@timminsgold.com
For More Information:
Corporate Development
Suite 520 - 609 Granville St
Vancouver, BC, Canada
V7Y 1G5
email: info@timminsgold.com
Tel :604-682-4002
Fax: 604-682-4003
Disclaimer & Additional Disclosure
The owner, editor, writer and publisher and their associates are not responsible for errors or omissions. The author of this report is not a registered financial advisor. Readers should not view this material as offering investment related advice. Authors have taken precautions to ensure accuracy of information provided. Information collected and presented are from what is perceived as reliable sources, but since the information source(s) are beyond our control, no representation or guarantee is made that it is complete or accurate. The reader accepts information on the condition that errors or omissions shall not be made the basis for any claim, demand or cause for action. Past results are not necessarily indicative of future results. Any statements non-factual in nature constitute only current opinions, which are subject to change. The information presented in stock reports are not a specific buy or sell recommendation and is presented solely for informational purposes only. The author/publisher may or may not have a position in the securities and/or options relating thereto, & may make purchases and/or sales of these securities relating thereto from time to time in the open market.
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-- Posted Monday, 27 September 2010 | Digg This Article
| Source: GoldSeek.com
Timmins Gold Delivers to Investors; Ramping Up Production
